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United Therapeutics Corporation (UTHR - Free Report) reported adjusted earnings of $3.98 per share for the third quarter of 2018, which beat the Zacks Consensus Estimate of $3.49. Earnings declined 15% year over year.

Adjusted earnings excluded the impact of share-based compensation expenses, an impairment charge related to investment in a privately-held company and some other items. Including these items, reported earnings came in at $2.42 per share, down 61% year over year.

Revenues for the reported quarter were $412.7 million, beating the Zacks Consensus Estimate of $372 million. Revenues declined 7% year over year.

Shares of United Therapeutics were down more almost 10% on Wednesday probably due to lower sales of key products, Adcirca and Remodulin. In fact, the stock has underperformed the industry this year so far, having declined 25% compared with the industry’s decline of 8% during the period.

Quarter in Detail

United Therapeutics markets four products for the treatment of PAH – Remodulin, Tyvaso, Adcirca and Orenitram. Please note that United Therapeutics bought exclusive rights to commercialize Adcirca (tadalafil) for the treatment of PAH in the United States from Eli Lilly (LLY - Free Report) in November 2008. Lilly markets tadalafil as Cialis for erectile dysfunction.

Adcirca sales were $74.6 million, down 25% year over year as generic competition resulted in lower volumes in the quarter. Adcirca experienced loss of exclusivity in May this year and a generic formulation was launched by Mylan (MYL - Free Report) in August. A higher allowance for product returns offset a price increase by Lilly and also hurt Adcirca’s sales.

Orenitram sales amounted to $53.8 million in the quarter, up 2% year over year. Remodulin sales were $153.6 million, down 18% year over year due to lower sales in international markets, which offset higher U.S. sales. Tyvaso sales totaled $107.8 million, up 21% year over year on price increases and difficult comparisons from the year- ago quarter.

Please note that Remodulin is also expected to face generic competition this year, which could reduce sales from these products. Remodulin lost exclusivity in June and generics are expected to be launched soon. However, on the call, management sounded confident that branded Remodulin revenues will continue to rise despite generic competition this year. This is due to the company’s branded product’s established safety profile and supply chain reliability, its patient support services and highly differentiated benefits. Moreover, the settlement agreements with the four generic manufacturers do not cover the right to market the generic formulations of Remodulin in the next-generation drug delivery systems.

Unituxin’s (for the treatment of pediatric patients with high-risk neuroblastoma) sales of $22.9 million were up 35% year over year on an increase in the number of vials sold and a price increase.

Research and development (R&D) expenses escalated 50% to $92.8 million due to higher costs to support the company’s pipeline of cardiopulmonary and cancer drugs and to develop its organ manufacturing projects.

United Therapeutics is working on expanded indications for some of its marketed products like Orenitram and Tyvaso. The company, at present, has six phase III programs in the fields of cardiopulmonary diseases and oncology. A phase III FREEDOM-EV study is evaluating an oral combination therapy of Orenitram – OreniPlus.

In August, United Therapeutics announced preliminary data from the study. The study met the primary endpoint, showing that Orenitram in combination with an oral PAH background therapy, delayed disease progression. United Therapeutics plans to submit regulatory application in the United States to get FREEDOM-EV data included on the label of Orenitram

Meanwhile, a phase III BEAT studyis evaluating Tysuberprost - esuberaprost in combination with Tyvaso. Data from this study is also expected this year.

United Therapeutics is working on bringing multiple second generation Remodulin drug delivery systems to drive Romudulin sales growth. In July, United Therapeutics gained FDA approval for Remodulin Injection in the Implantable System for Remodulin (ISR).

United Therapeutics had developed this implantable pump for delivering Remodulin intravenously in collaboration with Medtronic, Inc. (MDT - Free Report) . United Therapeutics and Medtronic pursued parallel regulatory filings related to the device and the drug. The company expects to be ready for commercial launch by early 2019.

United Therapeutics also developed RemUnity, a pre-filled, semi-disposable pump system for subcutaneous delivery of Remodulin (RemUnity) in partnership with DEKA. In February 2018, DEKA filed RemUnity with the FDA (510(k) filing that was accepted for review by the FDA. RemoPro, a pain-free subcutaneous Remodulin prodrug, is in phase I studies.

Licensing Deals

In the quarter, United Therapeutics purchased the North American rights to privately held Samumed LLC’s early-stage IPF drug candidate, SM04646 for an upfront payment of $10 million.

In September, United Therapeutics announced that it is acquiring MannKind Corporation’s phase III-ready investigational drug-device combination product, Treprostinil Technosphere. The product combines MannKind’s dry inhalation technology with treprostinil for the treatment of PAH. While MannKind will be responsible for manufacturing clinical and initial commercial supplies of treprostinil, United Therapeutics will look after the global development, regulatory and commercial activities plus the long-term commercial provisions. The deal closed in mid-October.

In October, United Therapeutics exclusively in-licensed CollPlant’s proprietary rhCollagen-based Bioink technology for the production of 3D bioprinted lung transplant. The deal also grants United Therapeutics an option to add up to three additional organs.

In August, United Therapeutics closed the previously announced acquisition of SteadyMed. With the deal, United Therapeutics added SteadyMed’s drug device pipeline product Trevyent for PAH patients to its portfolio, which could have posed competition to ISR. Along with the earnings release, the company said it plans to re-submit the Trevyent new drug application (NDA) to the FDA during the first half of 2019 instead of the original timeline of by the end of this year.

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

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